NEWSLETTER of November 4, 2022

The following content has been added at finexpert:

McKinsey & Company
EUROPE'S FINTECH OPPORTUNITY
Fintech has moved from the fringes of European finance to its core, but performance varies widely. If all countries could match the best in region, the economic benefits would be considerable. The deteriorating macroeconomic environment in both Europe and the world has hit fintechs hard, with valuations declining and access to financing becoming more difficult. Viewed from a long-term perspective, however, European fintechs continue to gain in strength and relevance for customers and the economy. In each of the seven largest European economies, as measured by GDP, at least one fintech ranks among the top five banking institutions. >more

BCG
STANDING STILL IS NOT AN OPTION: GLOBAL WEALTH 2022
The wealth management agenda is getting more crowded—and the items on it more urgent. Net zero, crypto, personalization, and digitization are not merely arenas that leaders can simply consider. They are imperatives whose outcomes will determine which institutions grow client share over the next five years. The most important question facing wealth managers (WMs) right now is not which initiatives to prioritize — but how best to execute on all of them. >more

KfW Research
GERMAN VENTURE CAPITAL BAROMETER 3. QUARTAL 2022
Sentiment in the German venture capital market stabilised in late summer. Market sentiment has thus stopped falling, although central banks again significantly raised key interest rates to fight inflation in the third quarter of 2022. The sentiment indicator of the early-stage segment remains virtually unchanged at -17.9 balance points (+0.3 points). Situation assessments and expectations have converged. Thus, the indicator for the current business situation dropped moderately, while the indicator for business expectations rose slightly. >more

KfW Research
ZWEI NOTENBANKEN – EIN PROBLEM: NACH INFLATION DROHT REZESSION
The record inflation figures of recent months have put the European Central Bank (ECB) and the U.S. Federal Reserve (Fed) under pressure to counter the high price increases with a more restrictive monetary policy. While the Fed started its monetary policy turnaround as early as March, the ECB did not complete its policy reversal until the July 2022 Council meeting. This Focus justifies this difference in the pace of monetary policy action taken so far by the two central banks with the different developments in the economy and the labor market after the pandemic. Since the ECB initiated its turnaround later, the window of opportunity for significant interest rate steps to fight inflation seems much smaller due to the emerging economic slowdown in the eurozone. The ECB is in a difficult position, and whether it can consistently follow through with its further course seems less clear. >more

THE ECONOMIC IMPACT OF ESG RATINGS
Florian Berg, Florian Heeb, and Julian F Kölbel
2022
This study examines the impact of ESG ratings on mutual fund holdings, stock returns, corporate investment, and corporate ESG practices, using panel event studies. Looking specifically at changes in the MSCI ESG rating, we document that rating downgrades reduce ownership by mutual funds with a dedicated ESG strategy, while upgrades increase it. We find a negative long-term response of stock returns to downgrades and a slower and weaker positive response to upgrades. Regarding firm responses, we find no significant effect of up- or downgrades on capital expenditure. We find that firms adjust their ESG practices following rating changes, but only in the governance dimension. These results suggest that ESG rating changes matter in financial markets, but so far have only a limited impact on the real economy. >more

THE RESILIENCE OF THE U.S. CORPORATE BOND MARKET DURING FINANCIAL CRISES
Bo Becker, and Efraim Benmelech
2022
Corporate bond markets proved remarkably resilient against a sharp contraction caused by the 2020 Covid-19 pandemic. We document three important findings: (1) bond issuance increased immediately when the contraction hit, whereas, in contrast, syndicated loan issuance was low; (2) Federal Reserve interventions increased bond issuance, while loan issuance also increased, but to a lesser degree; and (3) bond issuance was concentrated in the investment-grade segment for large and profitable issuers. We compare these results to previous crises and recessions and document similar patterns. We conclude that the U.S. bond market is an important and resilient source of funding for corporations. >more